Chilean Lawmakers Push for Restrictions on Chinese Buying Spree
(Bloomberg) -- A group of Chilean legislators is proposing tighter rules on foreign investment in strategic industries after a Chinese state-owned company agreed to take control of over half of the South American country’s power distribution.
Lower house members from both the opposition and the ruling coalition presented a bill that would allow congress to block acquisitions of strategic assets by foreign state-owned companies, with debate set to begin this week.
State Grid Corp. of China announced in November it would pay Naturgy Energy Group SA $3 billion for control of Chilean utility CGE. If the deal gets final regulatory approval, the company would control 57% of the country’s power distribution -- a move that wouldn’t necessarily hurt existing laws. The Chinese company, the world’s largest utility, currently owns 11% of that market through CGE peer Chilquinta, which it bought in October 2019 from Sempra Energy.
The purchases are part of a recent ramp-up in investments and acquisitions by Chinese companies in Latin America that has boosted Beijing’s influence across the region. But not all the investment comes from state-owned companies. In recent years, private Chinese companies have also acquired stakes in Chilean lithium giant SQM and salmon farmer Australis Seafoods. State-owned China Southern Power Grid Ltd. owns a stake in Chilean transmission firm Transelec.
“The Chinese state is quietly building a silk road that could strangle us in the future,” Miguel Mellado, one of the lower-house members backing the bill, said in an interview.
China’s Ministry of Commerce didn’t immediately reply to a fax seeking comment. Last week, the ministry’s spokesman Gao Feng said the economies of both countries are highly complementary, with greater opportunities and development prospects ahead.
“China is willing to work together with Chile to implement the important consensus reached by the two countries’ leaders,” he said at a Dec. 10 briefing celebrating the 50th anniversary of established diplomatic ties between the two countries.
President Sebastian Pinera’s administration hasn’t said if it will back or oppose the power deal or the bill limiting acquisitions. Legislators are putting pressure on the government to create a permanent and independent committee to evaluate future transactions involving foreign investors in strategic areas, said Mellado, a member of a party in the ruling coalition.
Still, restricting Chinese investments may expose Chile to retribution from Beijing. China is Chile’s main trading partner and accounts for about half of the South American nation’s copper shipments. China’s robust recovery is helping cushion Chile from the economic blow of the pandemic.
Chile isn’t the only country boosting scrutiny of foreign investment. In recent years, economies including Australia, the U.S., Japan, and the European Union have toughened their own laws in bids to protect national security.
More economic ties between countries necessarily leads to stronger political influence, Francisco Urdinez, international affairs professor at Pontificia Universidad Catolica de Chile told the Pauta Bloomberg radio show.
“It’s valid to say that the government of China as a whole has greater weight in economic negotiations in Chile than it did before,” Urdinez said.
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